[co-author: Leila Fleming]

Overview

The Department of the Interior (DOI) recently announced the newly created Lower Colorado River Basin System Conservation and Efficiency Program (the “Program”), funded through the $4 billion pot of money in the Inflation Reduction Act of 2022 (IRA; P.L. 117-169). Managed by the U.S. Bureau of Reclamation (“Reclamation”), the program is soliciting proposals for projects that advance water conservation and efficiency efforts and prevent the Colorado River Basin from declining to critically low elevations. Public entities and tribes should make note of Reclamation’s outlined proposal instructions and requirements and the fast-approaching proposal deadline of November 21 for proposals related to water conservation and efficiency efforts, with another proposal deadline expected in early 2023.

While the program is tailored to provide near-term solutions to bolster the Lower Colorado River Basin’s water supply, the DOI plans to provide at least $500 million to support water conservation efforts in the Upper Basin states of Colorado, Utah, Wyoming and New Mexico. In its totality, the program not only addresses drought issues but also mirrors President Biden’s proactive focus on climate change and environmental justice, as funding aims to bolster drought resilience and support disadvantaged communities.

Background on the IRA’s Inclusion of Reclamation’s Program

Reclamation’s program, and ultimately funding within the IRA, resulted from last-minute negotiations by western, Senate Democrats in August. The funding is directed at reclamation states, defined as Arizona, California, Colorado, Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington and Wyoming and is lumped into two different buckets.

First, the IRA appropriates $4 billion to remain available through September 30, 2026, for grants, contracts or financial assistance agreements for activities to mitigate the impacts of droughts within reclamation states. Public entities and Indian tribes qualify for funding under this provision. Moreover, this section prioritizes the Colorado River Basin and basins with similar levels of long-term drought. The funding may be used for: compensation for voluntary reduction in water consumption; voluntary system conversion projects that reduce demand for water supplies or environmentally benefit the Lower or Upper Basin of the Colorado River; and restoration projects that address the impacts of drought in a river basin.

Second, the IRA provides $550 million—to remain available through September 30, 2031—to fund grants contracts, or financial assistance for disadvantaged communities, as defined by the Commissioner of Reclamation. The financial assistance may cover up to 100 percent of the cost of planning, designing and constructing water projects that seek to provide domestic water supply to reclamation state communities that do not have access to domestic water supplies.

Timeline for Proposals

The Program will fund select projects through three components. The first component—which closes on November 21, 2022—calls on applicants to submit proposals for conservation projects resulting in wet water remaining in Lake Mead at certain set prices, as follows:

• One-year agreement: $330 per acre-foot
• Two-year agreement: $365 per acre-foot
• Three-year agreement: $400 per acre-foot.

The first component requires a system conservation agreement with Reclamation and Lower Colorado River and Central Arizona Project water delivery contract or entitlement holders are eligible for participation.

The second component—also closing on November 21, 2022—accepts proposals for water conservation and efficiency endeavors and will involve various pricing options. The second component similarly extends eligibility to Colorado River and Central Arizona Project water contract or entitlement holders. Moreover, Reclamation outlined proposal requirements, including the price per acre-foot and economic justification for the price; a plan description; proposed conservation amounts; verification methodologies; and a project timeline. Reclamation additionally encouraged applicants to include innovative concepts and collaborate among partners within their proposals.

Finally, the third component will focus on long-term system efficiency improvements. Reclamation will issue a separate funding opportunity notice regarding these projects in early 2023. Reclamation noted that the project review process will be competitive, with ranking factors including the volume and timing of water conserved in Lake Mead; conservation duration; and previous involvement in the Program, as well as current conservation programs.